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MicroStrategy Turnover Draws Analyst Scrutiny

By Michael S. Rosenwald
Washington Post Staff Writer
Wednesday, December 15, 2004; Page E01

MicroStrategy Inc. said yesterday that president and chief financial officer Eric F. Brown had resigned and that founder Michael J. Saylor would again hold the company's top three jobs, prompting some analysts to raise concerns about the company's stock.

Brown, who accepted a lucrative offer to become chief financial officer for the computer security firm McAfee Inc., has been credited with helping turn MicroStrategy around. He assumed his roles at MicroStrategy in 2000 shortly after the once high-flying Vienna firm restated financial results, turning profits into losses.

Michael J. Saylor, shown in a 2001 photo, cultivated an image as a high-flying technology executive in the 1990s but has kept a low profile in recent months. (Susan Biddle -- The Washington Post)

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MicroStrategy, which sells software that helps companies mine computer data, yesterday promoted vice president of finance Arthur S. Locke III to chief financial officer and said that Saylor, already chief executive and chairman, would resume his role as president.

The reorganization drew notes of caution from some analysts, and two firms, First Albany Capital and Wedbush Morgan Securities, downgraded the company's stock. By the close of trading, MicroStrategy shares had fallen $9.67, nearly 15 percent, finishing at $56.22.

Mark Murphy, an analyst with First Albany, cited Brown's role in MicroStrategy's strong performance of late and his worries that Saylor, who has voting control of the company, was consolidating additional power.

He noted that MicroStrategy is also dealing with "a high velocity of turnover" and the recent departure of two board directors, both from outside the company. The directors have since been replaced.

Brown, in an interview, said that any concerns about Saylor's power at the company are overblown.

"Nobody should have any concerns about that," he said.

Brown said he left the company because working for McAfee was an opportunity he couldn't pass up, especially since he considered his work nearly done in the MicroStrategy turnaround.

"The financial transformation that we set out to accomplish has largely been completed," Brown said. "The company is completely debt-free. It's operating at the highest levels of profitability."

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